14ymedio, Elías Amor Bravo, Economist, November 25, 2023 — Bancarización* (banking reform) in Cuba is becoming a one-act comedy for those who are bored with the low quality of the script and the cast that participates. Almost half a year after the approval of Resolution 111 of the Central Bank of Cuba, the conclusion that can be reached is that the process goes on as usual, without order or agreement, and the attempts of the leaders to cover it with a certain order fall on deaf ears. It’s like a second edition of the disaster of the Ordering Task,** but this time stumbling over the same stone. Incomprehensible. Take a look at what was said on State TV’s Roundtable program by Joaquín Alonso, president of the Bank, and his subordinates Julio Pérez, general director of Payment Systems of the Bank, and the vice president, Alberto Quiñones.
It should be emphasized that for any spectator who followed this edition of Randy Alonso’s primetime program, it is most likely that in the end he had more doubts and concerns than at the beginning. All the participants skirted around the issue, and none dared to recognize the obvious: a new failure of the communist regime is just around the corner.
And the first to contribute to the confusion was Joaquín Alonso, when he said that in Cuba there is talk of how to “bancarizar operations, instead of accessing the banking service, because all the actors of the economy already have full access to banking services,” which, he said in a surprising way, “makes us different from other nations.” Of course, saying that and saying nothing is the same thing, because Randy didn’t ask the question he should have asked right away: so why do Cubans continue to use cash in their usual transactions?
“All the actors of the economy already have full access to banking services,” which, he said in a surprising way, “makes us different from other nations.”
It goes without saying that none of the participants said anything like that. They dedicated themselves to citing the strong investments in technological equipment and point-of-sale terminals, which are then not taken advantage of, highlighting that “with the available resources, the colleagues of Etecsa, Enzona and the banking system have linked to each other, and we have the possibility of continuing to make progress in the bancarización of transactions.” But again, why do Cubans use cash and flee from the banks? It’s the same as tourism: why are they building hotel rooms if they are left empty?
The president of the Bank then said one of the things that attracted the most attention, that one reason it’s necessary to develop bancarización is in the high cost of cash. Yes, you have heard correctly: the president of the Bank said that “using banknotes means importing paper, inks, maintaining the equipment; then you have to transport them, distribute them, count them; and with about 10 uses in the economy they deteriorate, and then you have to destroy the banknotes and produce them again. It is a permanent cost in all banking operations, and it requires a large workforce, equipment and energy consumption.”
Unbelievable but true. Cuba has problems producing banknotes for its monetary system. Have you ever heard of a single country in the world that claims to have this problem? Of course not. It doesn’t exist. Only in Cuba. Now relax, because the farce had just begun.
Unbelievable but true. Cuba has problems producing banknotes for its monetary system. Have you ever heard of a single country in the world that claims to have this problem? Of course not. It doesn’t exist. Only in Cuba. Now relax, because the farce had just begun. <– leave here and also make a ’quote’
The president of the Bank then said that “among the factors that lead to the increase in the price of transactions is the growth and emergence of new economic actors; there are more and more entities to attend to and more monetary circulation. At the same time, more economic actors involve a greater number of people who go to the bank to deposit and withdraw cash, which also makes banking operations more expensive.” In the absence of blaming the embargo/blockade, they now blame the new economic actors.
Another blunder, because in reality the cause of the increase in monetary circulation is not a small and barely marginal private sector that fights against state power to open spaces, but a deficit of the uncontrolled state sector that has to be financed with sovereign bonds that eliminate the liquidity of the banks and put them at the service of a state that only squanders the money in expenses. Of course no one said this, but it’s the reality.
That is, according to this argument, people leave jobs in state banks because the work is boring, with no expectation of improvement and poorly paid. In other words, it’s the opposite of what happens with banks in the rest of the world.
But the president of the Bank continued and said that “to the above is added a distortion in the salaries of people who work in the state sector in relation to workers in the non-state sector. The bank is not one of the entities that pays the most in salaries and profits, so we have had a significant decapitalization in our workforce, and the employees are affected.” That is, according to this argument, people leave jobs in state banks because the work is boring, with no expectation of improvement and poorly paid. In other words, it’s the opposite of what happens with banks in the rest of the world.
And not content with the ridiculous comments he had already made at this point in the program, the president of the Bank took another leap into the void to say that “two contradictory aspects then come together: we increase wages, and every day more employees leave. Despite the empowerment we have given employees by raising their salaries, establishing indicators of payment by results, we have only 84% of our staff left.” How unfortunate. And of course, where there is more concentration of economic activity and population is where that 84% suffers the most. Nothing to see or say, not a practical solution.
Just the eternally repeated message that “we will continue to face that problem from the Central Bank and, above all, from the Metropolitan Bank. We will continue to identify what to do so that people will go less to a bank to get cash. One of the lines of action in that sense is bancarización, which has been happening gradually for some years.” Unbelievable.
Next he wanted to explain why it was necessary to accelerate bancarización from last August. He said that “since before 2020, transactions and the use of electronic means of payment had been growing. In the pandemic period, home operations also increased, and electronic commerce was enhanced. In 2022 there was still a growth in bancarización transactions, but now in 2023, after the pandemic, there has been a relaxation in all those mechanisms, and we went back, from 78% in the payment matrix of these operations, to 75%.”
Where is the centrally planned economy that is unable to foresee behavior as simple as this?
And he concluded by pointing out that “from August to date, after the approval of Resolution 111, those operations have been growing at a monthly rate of 0.6%; and we expect to close the year with a growth of almost 30% in operations through electronic payment channels.” Where is the centrally planned economy that is unable to foresee behavior as simple as this?
However, the president acknowledged at this point that “the tendency to withhold cash in the hands of the population is maintained, above all, by a group of non-state economic actors.” And in this regard he added that “the cash that is kept out of the bank continues to grow, and this is a harmful phenomenon for the economy, because it causes an increase in prices.” In other words, on the one hand, electronic operations increase, but on the other, cash transactions are maintained. Where exactly are we? How is it possible for all this to happen in an economy that barely grows by 1.8% and is practically stagnant?
“They need to create certain scenarios in the economy so that the new actors can fully develop, without the need to retain cash; a phenomenon related to the reduction of offers and the increase in actors itself.” Have you understood anything? Not me.
Well, in reality, they don’t know, because the president of the Bank said at the time that “they need to create certain scenarios in the economy so that the new actors can fully develop, without the need to retain cash; a phenomenon related to the reduction of offers and the increase in actors itself.” Have you understood anything? Not me. What scenarios must be created in the economy for the development of cashless actors? Let him explain it.
And of course, having arrived at this point and with a threatening tone, he said that “cash withholding is not always due to lawful needs. For example, it is done to access foreign currency, since the State cannot offer a foreign exchange market, because the country’s economy has a deficit in that sense.” The question is why the state does not undertake the reform of the foreign exchange market and maintains the absurd status quo.
In addition, he accused the use of cash as a factor that does not allow the banking system to increase the loan fund necessary to leverage and finance the economy of the private and state sectors. That is, the president of the Bank seeks more liquidity for the state deficit, and he asked for clarity in the transactions. Maybe he should start with his own.
He then asked people to deposit money into their accounts and assured them that “bank secrecy is one of the inalienable principles of the system,” when Cubans of several generations know that this is not the case. As if the population had money left over to deposit in banks and also had some interest in electronic payments in shops. More than one spectator had to turn off the program at this point.
Afterwards, Julio Pérez, general director of the Bank’s Payment Systems, said that one of the commitments is to reconcile the work done in recent months with all economic entities, so that they can see their main ally in the bank. And Alberto Quiñones, vice president of the Bank, said that the premise of bancarización contains a gradual creation of conditions, and accelerated progress happens when those conditions are created.
In relation to Point of Sale (POS) Terminals, he said that they are working, and he encouraged their use mainly in TRD and Cimex stores. In this sense, he pointed out the work of Fincimex and REDSA in sustaining the network of POS and ATMs in the country. A lot of emphasis on the means, but never on the results: that’s the model.
Finally, there was talk of the Caja Extra service, the creation of bank cards linked to salary payrolls and bank accounts to collect taxes from private actors, whom he accused of withholding cash for an alleged practice of price differentiation depending on the payment channel, which he described as an illegality that the population cannot accept.
And in this regard, he insisted that economic actors must have the QR Code of the business available, “and not the staff, who therefore do not receive the bonus percentage for the use of payment gateways.” And for the same reason, he pointed out that “the population cannot be required to pay in foreign currency, except for the stores in MLC***.” In fact, it was confirmed that on January 2, “the business that does not have the conditions created for the population to pay through electronic gateways will not be able to provide services.” Not a good idea.
*Bancarización is a term used in Cuba and other Latin American countries. All economic transactions are made by debit card, including cash withdrawals and the payment of salaries. The term does not have a counterpart in English so the Spanish term is used throughout this translation.
** The Ordering Task is a collection of measures that include eliminating the Cuban Convertible Peso (CUC), leaving the Cuban peso (CUP) as the only national currency, raising prices, raising salaries (but not as much as prices), opening stores that take payment only in hard currency, which must be in the form of specially issued pre-paid debit cards, and a broad range of other measures targeted to different elements of the Cuban economy.
***”Stores in MLC” only accept payment in hard currency, and are also the primary ‘physical’ stores in the country that sell anything beyond the most basic items, outside the informal/black market.
Translated by Regina Anavy
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